As they grow older, many seniors are prone to giving away their assets, whether by monetary gifts to loved ones, donations to charity organizations, or other types of transfers. Unfortunately, they may not be aware that these gifts could be impacting their Medicaid eligibility.
To qualify for benefits, Medicaid applicants must spend down their countable assets to be under a specific limit. However, Medicaid has implemented certain measures to penalize applicants who give away their assets within five years prior to applying. That’s why it’s important for you to be aware of these rules as you walk through the spend-down process with your senior clients.
Medicaid applicants cannot simply give away their assets in order to qualify for benefits.
Medicaid Rules for Gifts or Divestments
The Medicaid program stipulates that if an applicant or their spouse has made an ineligible transfer of assets (also known as gifts or divestments) within the last five years—the lookback period—the applicant will be subject to a period of ineligibility—the penalty period—when they are otherwise eligible for Medicaid.
The Lookback Period
The lookback period is the five-year period before an individual applies for Medicaid. At the time of application, the caseworker will review the applicant’s financial statements from the last five years. If the applicant made any ineligible transfers during this time, they will be ineligible for benefits for a certain period of time based on the total amount divested.
The Penalty Period
The penalty period is the period of ineligibility an applicant is subject to when they have made divestments during the five-year lookback period. The penalty period begins once the applicant is deemed “otherwise eligible” for Medicaid benefits, aside from the ineligible transfer. The length of the penalty period is determined by dividing the total amount of divested assets by the state-specific Divestment Penalty Divisor.
What Is a Divestment?
A divestment, also referred to as a gift, is a transfer of assets for less than fair market value. This may include:
- Donating money to charity
- Giving money or items to loved ones
- Transferring assets to an irrevocable trust
- Selling items for less than fair market value
What About Transfers Between a Married Couple?
Married couples can transfer assets back and forth between spouses without any penalty up until the institutionalized spouse becomes eligible for Medicaid benefits. After that point, they may continue transferring assets to the community spouse as long as the resulting amount does not exceed the Community Spouse Resource Allowance. If it does exceed the CSRA, the transfer will count as a divestment.
How to Spend Down Assets for Medicaid
Although your clients cannot give away their assets in order to qualify for Medicaid, they do not have to exhaust their life savings paying the nursing home bill before they can achieve Medicaid eligibility. Fortunately, you can help them use a Medicaid Compliant Annuity to accelerate their eligibility for benefits and protect their assets in the process.
Read More: How to Spend Down Assets for Medicaid
Whether you’d like to learn more about helping clients qualify for Medicaid or discover how we can work together, we invite you to schedule a call with one of our in-house specialists.